To be a "public benevolent institution", an
organisation does not need to provide direct relief from poverty or
distress – carrying out charitable activities indirectly as a
fund raiser may be enough.
More organisations may be entitled to endorsement as a
Deductible Gift Recipient or be exempt from fringe benefits tax
following the Federal Court's judgment on the meaning of
"public benevolent institution" (The Hunger Project
Australia v Commissioner of Taxation  FCA 693; Clayton Utz
acted for The Hunger Project Australia).
The importance of the issue can be seen from the fact that the
litigation was funded under the Australian Taxation Office's
(ATO's) test case funding program.
The decision turned on whether a public benevolent institution
must give aid directly to those in need or distress. To date, the
ATO's position has been that directly charitable activities are
a prerequisite. This decision means that there is no such
requirement, so that organisations engaged primarily in fundraising
activities could qualify as a public benevolent institution.
The Hunger Project Australia's model for helping
The Hunger Project Australia is a not-for-profit company that
forms part of a network of The Hunger Project entities.
The Hunger Project seeks a sustainable end to world hunger
through a methodology based on principles of self-reliance, gender
equality and participatory local governance. The Hunger Project
entities in the developed world raise money to fund hunger relief
programs run by its sister The Hunger Project entities in
Apart from fundraising, The Hunger Project Australia also
participates at the global level in a number of strategic
It was not in dispute that the objects and the activities of The
Hunger Project Australia are charitable. However, the Commissioner
refused to endorse the entity as a public benevolent institution on
the basis that, as an entity engaged in the provision of funding
for independent overseas projects, it does not provide direct
relief from poverty or hunger.
The Federal Court rejects the Commissioner's view of a
public benevolent institution
The Federal Court held that The Hunger Project Australia's
principal object of relieving hunger is achieved through its close
relationships with The Hunger Project entities in developing
Contrary to the assertion of the Commissioner, there is no
authority for the proposition that the expression public benevolent
institution requires such an institution directly to dispense
What next for the tax treatment of public benevolent
The decision brings some much-needed clarity to an area that has
been complex and confused. It also recognises that performing
charitable activities on a global scale such as the sustainable end
to world hunger requires global cooperation and dependence on the
assistance of agents. The decision is consistent with a more modern
way of delivering outcomes to the disadvantaged.
As a result of the decision, more charitable entities that are
principally engaged in fundraising activities may be entitled to
obtain endorsement as a Deductible Gift Recipient, or to access an
exemption from fringe benefits tax.
The Commissioner has until 7 August 2013 to file an appeal to
the Full Federal Court.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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